Badger Meter (BMI) Q1 2026 Earnings Transcript

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DATE

Friday, April 17, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer — Kenneth C. Bockhorst
• Senior Vice President and Chief Financial Officer — Daniel R. Weltzien
• Vice President — Robert A. Wrocklage
• Director of Investor Relations — Barbara Noverini

TAKEAWAYS

• Total Sales -- $202 million, a decline of 9% year over year, attributed to the completion of major AMI projects and weaker-than-expected short-cycle order rates.
• Utility Water Sales -- Decreased 10% year over year, reflecting headwinds from project pacing and short-cycle demand variability.
• Short-Cycle Revenue Shortfall -- Approximately $15 million to $20 million lower than internal expectations, with management emphasizing timing, not structural demand decline.
• Gross Margin -- 41.7%, down 120 basis points from last year’s record, primarily due to adverse mix but remaining near the upper end of the target range.
• Selling, Engineering, and Administrative (SEA) Expenses -- $49.2 million, up $3.1 million year over year, including $1.2 million in UDLive transaction costs and higher personnel costs, offset by lower incentive compensation.
• SEA as a Percentage of Sales -- Increased by 360 basis points due to lower volumes, with the effect described as temporary by management.
• Operating Earnings -- $35.2 million, with an operating margin of 17.4%, a decline from 22.2% in the same period last year.
• Diluted Earnings per Share -- $0.93, compared to $1.30 last year.
• Primary Working Capital -- 20% of sales, down from 20.9% at year-end.
• Free Cash Flow -- Approximately $30 million, consistent with the prior year period.
• Share Repurchases -- 256,000 shares repurchased for $38 million, leaving $115 million authorized for additional repurchases.
• Backlog & Project Mix -- Backlog normalized from elevated multi-year levels, contributing to current period’s revenue variability as major AMI projects concluded.
• New AMI Project Pipeline -- 2.6 million to 3.6 million connections across awarded but not yet started projects, compared to 800,000 connections from the prior cohort, highlighting step-function growth potential.
• PRASA Project -- First major purchase order received, with deployment expected to begin midyear and management stating, “our confidence is higher today than it was before.”
• UDLive Acquisition -- Announced definitive agreement to acquire UK-based UDLive for $100 million, citing its 90% tender success rate, expected positive operating profit, and immediate EPS accretion after closing in April.
• 2026 Revenue Outlook -- Management expects full-year organic revenue to be on balance with 2025, with absolute quarterly revenue “sequentially improving” as awarded projects ramp and short-cycle orders recover.
• Gross Margin Target Range -- Management reiterated the 39%-42% target band will hold for the remainder of the year despite mix fluctuations.
• Cost Discipline Measures -- Executives’ salaries reduced by 10% for six months as part of temporary cost reductions to protect margins during revenue pacing.
• Capital Allocation Priorities -- Management affirmed ability to invest, return cash to shareholders, and pursue M&A under varying macro conditions, citing a strong balance sheet.

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RISKS

• First quarter sales “down 9% year over year to $202 million,” with management citing weaker-than-anticipated short-cycle order rates and project pacing delays as the primary headwinds.
• SEA expenses increased by $3.1 million, with a 360 basis point rise as a percentage of sales, driven by deleveraging from reduced volumes, which is expected to be temporary but negatively impacts short-term margin.
• Gross margin fell by 120 basis points and operating margin dropped to 17.4% from last year’s 22.2%, expressly linked to lower volumes and less favorable mix from completed project deployments.
• Management stated, “we absolutely expect sequential growth that is likely below last year,” flagging continued revenue headwinds before anticipated recovery in the second half.

SUMMARY

Badger Meter (NYSE:BMI) reported a 9% year-over-year sales decline, attributing the result to the conclusion of multi-year AMI projects and short-cycle revenue variability. Key project completions and backlog normalization have revealed inherent revenue unevenness across quarters, which management describes as a timing issue rather than a signal of weakening market demand or competitive position. A robust pipeline of awarded AMI projects, representing 2.6 million to 3.6 million connections, is expected to drive sequential revenue improvement in the second half. The acquisition of UDLive, producing $22 million in trailing twelve-month revenue, is positioned as immediately accretive and expands the company's global water infrastructure software and hardware offerings. Strategic cost discipline, including a six-month 10% executive salary reduction, and a reaffirmation of gross margin targets, underpin management’s confidence in capital allocation and long-term growth outlook.

• Management emphasized that “full-year 2026 organic revenue to be on balance with 2025,” despite variable quarterly pacing.
• The PRASA project will begin deployment midyear, marking the largest awarded project to date, and expected to influence second-half activity and future operating leverage.
• UDLive’s addition advances Badger Meter’s position as a “global leader in sewer line monitoring,” with its technology achieving a 90% tender success rate in the UK.
• Accelerating AMI adoption and competitive project wins, especially cellular AMI, support potential meter share gains, recurring software growth, and expanded beyond-the-meter solutions.
• Gross margins remain near the upper end of the normalized 39%-42% range, affirmed by management’s pricing discipline and mix management principles.

INDUSTRY GLOSSARY

• AMI (Advanced Metering Infrastructure): Networked metering systems enabling utilities to remotely collect real-time water usage data, reducing manual intervention and supporting advanced analytics.
• Turnkey Project: A contract scope including complete system delivery—products, installation, ancillary equipment, and support—versus supply-only arrangements limited to hardware and software.
• Short-Cycle Orders: Routine orders from utilities, distributors, or direct customers subject to frequent, unpredictable timing based on normal replacement and demand cycles, with limited backlog visibility.
• BEACON SaaS: Badger Meter’s proprietary secure software suite for advanced metering analytics, delivered via subscription as a cloud-hosted solution.
• ORION Cellular AMI: Cellular-based technology from Badger Meter enabling infrastructure-free meter reading and advanced data communication.
• SEA (Selling, Engineering, and Administrative): Aggregate operating expenses excluding cost of goods sold, encompassing selling, engineering, and administrative functions.

Full Conference Call Transcript

Kenneth Bockhorst: Thanks, Barbara, and good morning. Before getting into the specifics of the quarter, I would like to start by setting the stage for a more detailed discussion on our Q1 results and how we are thinking about our metering business more broadly. We operate in a market supported by strong long-term macro drivers, recurring replacement cycles, and increasing adoption of advanced technologies ranging from our ultrasonic meters to industry-leading cellular AMI, beyond-the-meter solutions, and recurring software and analytics. These durable factors, combined with solid execution, have driven consistent value creation over time. At the same time, it has always been true that our business can be uneven quarter to quarter and year to year.

Over the 2023 to 2025 time period, robust revenue growth driven by multiyear cellular AMI share gains and overlapping project activity reduced the visibility of this inherent unevenness. In mid-2025, we began to signal that the revenue contribution from certain historical AMI projects would decline as deployments concluded ahead of awarded but not yet started AMI projects. As a result of this project pacing and backlog normalization dynamic, we previously communicated that our 2026 revenues would be weighted toward the back half of the year. On page three of our earnings slide deck, you can see the impact from project pacing in our first quarter 2026 revenue.

In addition, short-cycle order rates, for which visibility is always more limited, were weaker than we anticipated, resulting in approximately $15 million to $20 million of lower revenue versus our internal expectations. As a result of those combined headwinds, first quarter sales were down 9% year over year to $202 million. While our expectations for a solid second half have not changed, the softer start to the year prompts us to anticipate full-year 2026 organic revenue to be on balance with 2025. Normally, I would turn the call over to Daniel at this point to walk through the financial results in detail.

However, in light of the below-expectation sales results, I am going to turn it over to Robert to walk through greater detail on this multilayered customer dynamic. In short, Robert will explain our view that this first quarter outcome is timing-related and does not reflect a structural change in either market demand, our broader competitive position, or the long-term market drivers of our business. Robert will walk through a subset of anonymized details related to several awarded but not yet started AMI projects that are expected to begin deployment in 2026.

This is not the level of project detail we would normally provide each quarter, but these awarded projects, along with others in the funnel, help to inform our outlook for the rest of 2026 and support our expected momentum into 2027. With that, I will turn it over to Robert.

Robert Wrocklage: Thanks, and good morning, everyone. Please turn to slide four. To put the first quarter results into context, it is helpful to briefly revisit the 2023 to 2025 time period. During this multiyear time frame, we consistently described backlog as elevated in 2023 and 2024, with normalization progressing through 2025. That backdrop supported strong but moderating revenue growth. As shown on the slide, four sizable AMI projects that began deployment in 2023 were meaningful contributors during the same time period, collectively representing nearly 800 thousand connections. These were not the only AMI projects ongoing or completed during this multiyear time frame; rather, this selected cohort of projects represents the most significant project revenue contributors for illustrative purposes.

Two of these projects, JEA and OUC, were supply-only projects, with our involvement limited to the shipment of our meters, endpoints, and recurring BEACON SaaS revenue rather than full deployment execution. PCU and Galveston were turnkey projects for which the scope of work included Badger Meter, Inc. products and SaaS, plus installation labor and ancillary equipment such as meter boxes and lids. As previously noted, both project size and scope matter. Turnkey projects generate significantly greater revenue than equivalently sized supply-only projects. That relationship is illustrated in the stacked bar chart and is one of several drivers of revenue unevenness. These projects ramped in 2023 off a prior year consolidated revenue base of $566 million.

They peaked in 2024 and declined through 2025 as the projects approached completion. Over the same period, our generalized order backlog moved from elevated to more normalized levels. Together, the size and scope of projects combined with backlog normalization supported strong results over this three-year period while muting the impact of underlying short-cycle order variability, which was always present, just not visible in our results against this positive backdrop. Within these four AMI projects, you can see the revenue contribution is uneven, with meaningful variability quarter to quarter based upon project and customer specifics that are not related to underlying demand, competitive dynamics, or long-term market drivers. We entered 2026 with these projects largely completed and a normalized backlog.

Against this 2026 backdrop, short-cycle order rates, where we have the least amount of visibility, were weaker than expected and thus the below-expectation revenue outcome. Now to the facts that have and will continue to inform our forward revenue outlook. Slide five highlights our forward look at awarded AMI projects that are expected to begin deployment in 2026. Importantly, this is not a top-projects list but rather a snapshot that illustrates several important characteristics of our business, competitive positioning, and technology leadership. Many of these awards have been known to us for some time—in some cases, years—with typical lags between initial award indication and deployment driven by a number of factors.

These timing differences are common in our industry and contribute to revenue unevenness, and they also represent just one layer of the multistage opportunity funnel that informs our view of future growth. This list also reflects a wide range of funding sources including capital budgets, rate cases, grants, WIFIA loans, and other financing, underscoring broad funding availability and sources. Also illustrated here is additional information on competitive conversions, diverse deployment types, and technology adoption across both municipal and investor-owned utilities. Most importantly, this project set represents between 2.6 million and 3.6 million connections over multiple years, meaningfully larger than the prior project cohort of 800 thousand connections that supported growth from 2023 to 2025.

Turning to the PRASA project, we received the first significant purchase order for the project in the first quarter, and we expect the utility’s installation partners to begin deployment activity around midyear. PRASA, together with the successful completion of the projects previously discussed on the call and others not announced, underscores our continued AMI success with customers of any size and complexity. In summary, while the first quarter results stand out relative to recent history, we view 2026 as a short pause, not a break in our trajectory.

As we move into the next phase of growth, we expect continued expansion of our AMI installed base, and this in turn will emphasize ORION cellular AMI as the market standard for AMI, which creates opportunities for further meter share gain, recurring software revenue, and broader adoption of our beyond-the-meter solutions. With that, I will turn the call back over to Kenneth.

Kenneth Bockhorst: Thanks, Robert. In addition to the project awards described by Robert, we continue to see constructive market and customer activity across our extended opportunity funnel, including pending RFPs and early utility engagement with consultants, which remains healthy as utilities continue to prioritize modernization, efficiency, and visibility across their water networks. These long-term secular drivers remain intact. Despite the soft start to the year, I am encouraged by the consistency we have delivered in gross margin performance, overall SEA discipline, and cash flow, which speaks to the strength of our team’s execution around the world and the resilience of our business model.

From a near-term cost perspective, we have implemented measured cost reduction actions, including a 10% salary reduction for our executives for the next six months, to maintain spending discipline and protect margin integrity as we navigate revenue pacing throughout the year. I will come back at the end to talk about our outlook and the exciting announcement we made this morning around the acquisition of UDLive, but before I do that, I will turn the call over to Daniel to talk more about the numbers.

Daniel Weltzien: Thanks, Kenneth. The contrast between 2026 and 2025 is clear. So let us get into those details. Turning to slide six, total sales were $202 million, representing a 9% decline year over year. Utility water sales declined 10% year over year, reflecting the project pacing and weaker short-cycle order rates referenced by both Kenneth and Robert. Lower metering product revenue was partially offset by increased BEACON SaaS, SmartCover, water quality, and network monitoring product revenues. Collectively, beyond-the-meter product line growth was a bright spot in the quarter that should not be lost in the broader revenue headline. Sales for the flow instrumentation product line were down 4% year over year.

Turning to profitability, gross margin was 41.7%, down 120 basis points against a record gross margin in 2025, primarily reflecting product and project mix. Gross margins remained robust and near the top end of our normalized range, which reinforces the durability of our pricing discipline and structural mix benefits, despite lower year-over-year volumes. Selling, engineering, and administrative expenses were $49.2 million, increasing $3.1 million year over year, driven primarily by $1.2 million in transaction costs associated with the UDLive acquisition, higher personnel costs, and an additional month of SmartCover SEA costs, offset by reduced incentive compensation expense based upon the first quarter results.

SEA as a percentage of sales increased by 360 basis points year over year, primarily due to the deleveraging effect of lower volumes in the quarter, which we expect will be temporary. As a result, operating earnings were approximately $35.2 million and operating margin was 17.4%, compared to a record 22.2% in the prior-year period. As awarded projects begin in the second half, we expect operating leverage to improve while maintaining our typical level of cost discipline. The effective income tax rate was 24.8% compared to 24.4% last year. Diluted earnings per share were $0.93 compared to $1.30 in the prior-year period. Primary working capital as a percentage of sales decreased from 20.9% at year-end to 20% as of 03/31/2026.

We generated strong free cash flow in the quarter of about $30 million, in line with 2025. As is normal, our first quarter reflected typical seasonality within incentive compensation and retirement plan contributions paid out for the previous year. In 2026, we repurchased 256 thousand shares for a total of $38 million and have $115 million left on our share repurchase authorization. With that, I will turn it back over to Kenneth.

Kenneth Bockhorst: Thanks, Daniel. Before I give the outlook, I want to highlight the acquisition we announced this morning. Please turn to slide seven. We signed a definitive agreement to acquire UDLive for $100 million, funded with cash on hand plus contingent consideration. UDLive, a UK-based provider of hardware-enabled software solutions for sewer line monitoring, complements SmartCover by extending our sewer monitoring capabilities across a broader range of use cases, network conditions, and geographies. Much like SmartCover in the US, UDLive has built a leading position in the UK, pairing low-power, easy-to-install sensors with proprietary analytics software that delivers continuous, real-time insight into sewer network conditions.

The value and differentiation of UDLive’s sewer line monitoring technology is evidenced by a 90% tender success rate since its inception and routinely high technology assessment scores from utilities and consultants. Please turn to slide eight. The combination of SmartCover and UDLive within our BlueEdge suite of solutions positions Badger Meter, Inc. as a global leader in sewer line monitoring, offering customers options across hardware-enabled software platforms and communications configurations, consistent with our choice-matters approach. For those familiar with our history, there is a clear parallel to our acquisitions of ATI and s::can, which together created a comprehensive water quality platform and extended our geographic reach.

The strategic rationale for UDLive and SmartCover is similar within the sewer line monitoring market. In the trailing twelve-month period ended February 2026, UDLive generated approximately $22 million in revenue and delivered positive operating profit. The transaction will be accretive to EPS in year one, and we anticipate closing in April. We believe our global channels can further accelerate UDLive’s growth and enhance operating leverage over time. Now looking ahead, we continue to expect 2026 activity to be back-half-weighted as awarded AMI projects advance into deployment. As you are aware, we typically do not provide formal guidance; however, we recognize that investors are navigating this project pacing dynamic for the first time in several years.

With that in mind, we are offering additional transparency to our current view, informed by today’s inputs of revenue pacing for the remainder of the year. As awarded projects enter deployment and short-cycle orders recover from first quarter levels, we expect sequential improvement in absolute quarterly revenue dollars as the year progresses, resulting in full-year 2026 revenue, excluding the UDLive acquisition, to be in line with 2025. More specifically, we expect second quarter 2026 organic revenue dollars to sequentially improve from the trough of Q1 but to be down year over year against the highest quarterly revenue figure in the company’s history.

In the near term, our focus remains on discipline to manage near-term variability while building momentum throughout the year. Importantly, our financial model is built to support our capital allocation priorities across uneven operating conditions, enabling continued investment in the business, returning cash to shareholders, and value-enhancing M&A while maintaining a strong balance sheet. We will now open the call for questions.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Nathan Jones with Stifel. You may proceed with your question. Good morning, everyone.

Robert Wrocklage: Morning, Nathan. Morning, everyone.

Kenneth Bockhorst: Hey. Good morning.

Nathan Jones: I guess I will start with the short-cycle orders first. You talked about maybe $15 million to $20 million less than expected on that, which is, you know, half or more of the miss versus consensus during the quarter. I have been around with Badger Meter, Inc. long enough to remember the volatility in some of those. Is there any color you can give us on what underlying reasons for that were? I mean, there was some pretty bad weather in the Northeast during the quarter. Is it weather-related or something else? Any color you can give us on that?

Kenneth Bockhorst: Yes. I think the key to remind the group—some people newer to the story—that the unevenness that you have recognized because you have followed us for a long time is not new, as we talked about, and there is really not one underlying thing. We are selling to 50 thousand utilities across the country through various different replacement cycles. The variability has always been there, and we have talked about this a few times. Sometimes the variability is there in an equal amount to the high side. But when it is to the high side, it does not really affect people’s view very much because that is all goodness.

In this particular case, I would not limit it to one thing. It just happened at this particular time and with unfortunate timing given what Robert had just talked about on where we are in the midst of this air pocket, but not really one thing. It is relatively normal.

Robert Wrocklage: I would just add that we are certainly not chalking it up to geographic weather by any means. While it is generalized, if we look at our customer segmentation of where the weakness came from, it is indicative more of timing aspects than anything related to our positioning in the market or share or other things. So this is absolutely timing-based.

Nathan Jones: I guess I will ask one on PRASA. You talked about having got the first PO for that, which is great, and expecting the first installations to start midyear. Are you more confident today that the project will ramp up on time and ramp up in the second half? I guess investors have been concerned that the Puerto Rican government has not been exactly the most reliable in terms of getting things done, not for Badger Meter, Inc. specifically, but overall over the last few years. So just your level of confidence that it really does ramp up in the back half of the year.

Kenneth Bockhorst: Yes. Robert will probably have something to add here as well since he is managing that very closely. The fact that we brought it up last month shows that we already had quite a bit of confidence in it. The fact that we have a PO and that we know installation partners are lined up—our confidence is higher today than it was before. Robert put his hand up, so he agrees.

Nathan Jones: Okay. Fair enough. I will pass it on. Thank you very much.

Kenneth Bockhorst: Alright. Thank you.

Operator: Your next question comes from the line of Jeffrey Reeve with RBC Capital Markets. Your line is open. Please go ahead.

Jeffrey Reeve: Hey. Good morning. I appreciate all the color thus far. For your updated guidance, what is the risk that some of the late second-half starts push into 2027, and is this outlook appropriately conservative now?

Kenneth Bockhorst: I would call this additional transparency rather than guidance because, given the variability, it is hard to guide from quarter to quarter or year to year. As the year progresses and we get closer to each of these projects getting into deployment mode, we see more activity. Some of these that you can see on the list are turnkey, and we are actively engaged with them on the upfront planning. For those that are supply-only, in some cases, we have POs; in some cases, they are still planning. As we get closer and closer, our confidence level is better today than it was ninety days ago.

Jeffrey Reeve: Appreciate that. Then can you remind us what specifically is in that short-cycle mix? Maybe what percent of sales? Is that muni budget-driven? Macro-driven? What drives that?

Kenneth Bockhorst: A lot of people—even though we talk about short-term variability and why we do not necessarily size or talk much about backlog—is because the majority of the business is short cycle. Distribution is very short cycle. Individual utilities that we sell directly to that are just doing the ordinary buying and are not in an in-flight AMI project are often ordering, and those tend to be short cycle. Utilities order when they want them. Everybody in the industry is at normal lead times. We have basically reverted back to normalized lead times and backlog from before the supply chain constraints and COVID.

Even when backlog was elevated, it moved from short visibility to slightly more visibility; it was not like we had a huge backlog that we were chunking through.

Jeffrey Reeve: Got it. Appreciate that. I will pass it on.

Operator: Your next call comes from the line of Analyst with Baird. Your line is open. Please go ahead.

Andrew Krill: Hi. Good morning. Thanks for taking my questions. I wanted to build on your commentary about short-cycle order weakness being timing-related. Does the flat organic outlook contemplate any recovery opportunity relative to that $15 million to $20 million, or does it assume that short-cycle weakness persists here?

Kenneth Bockhorst: By definition, because it is short cycle, we do not have a tremendous amount of hard order visibility. It is not like we have seen a few weeks of excess purchase orders coming through that would change our view. Our view is informed by talking to our distributors and hearing what they are seeing in the field because they are out talking directly to customers. It is also informed by the direct sales relationships that we have with our direct sales force. We are not getting from the market in any way that people are constraining budgets for the normal replacement demand that comes with metering.

It just happens to be an air pocket at the same time that there is a project air pocket.

Robert Wrocklage: The thing I will reinforce here is the variability that we are talking about specific to Q1 that is now more visible has always existed, inclusive of the 2023 to 2025 time frame. It was less visible in the revenue outcomes because of the backlog condition combined with the projects in flight. I just want to make it clear that this variability is and has always existed. It is just happening to be more visible in 2026.

Andrew Krill: Okay. Then on the flat organic outlook for the year, can we dial in 2Q versus the second half a little bit more? Kenneth, you mentioned 2Q would be down year over year. Should we assume a similar decline to 1Q?

Kenneth Bockhorst: Given the short-cycle nature of the largest portion of the business, I am not going to size it. I wanted to give enough detail to make sure everyone understands that we do not just snap back to growth on a year-over-year quarterly basis, especially against an all-time record quarter. We are just trying to be realistic. I am not looking to size it to a number in between, but we absolutely expect sequential growth that is likely below last year.

Andrew Krill: Alright. Thank you very much.

Operator: Your next question comes from the line of Andrew Krill with Deutsche Bank. Your line is open. Please go ahead.

Andrew Krill: Hi. Thanks. Good morning, everyone. I want to ask about gross margin. They held up well in the first quarter considering. Is there anything you would call out there? Then could you give us some help on how they should trend the rest of the year? Do you think still near the higher end of your 39% to 42% target range, or could there be some sequential pressure as these projects ramp?

Daniel Weltzien: The important thing to point out is a couple of things. One, the 39% to 42% range we still have confidence in, and that is where we anticipate operating for the rest of the year. In terms of the Q1 result, as we pointed out in the prepared remarks, some of the areas where we saw strength in the first quarter were around the meter technologies—of course, our BEACON SaaS revenue continuing to chug along with the recurring nature that it has—and all of those being above line-average margin, which helped us get to this blended rate in the first quarter. As we progress throughout the year, again, our expectation is to continue to operate within that range.

We have talked previously about turnkey projects potentially having different margin profiles than sales through distribution, for example. So mix factors may exist. But, again, just reiterating that the range we talked about historically is still reasonable.

Kenneth Bockhorst: To add to that, from an operating point of view, your question was what we see as these projects ramp. Our value-based pricing principles all remain intact, so we are extracting the price that we deserve for providing this value at a price that customers see the value to invest in. Whether it is a little lower on the front side on gross margin, it feels really good on the SEA leverage side and vice versa. So operating profit in any of these cases is something we are comfortable with.

Andrew Krill: Thanks. That is helpful. Switching to Section 232 tariffs—it has been a big debate the past couple of weeks with some of the changes to how those are implemented. Can you give any color on how that impacts Badger Meter, Inc., in particular the Nogales facility? If most of what you are bringing into the US used to be excluded under USMCA, is that now a headwind you have to deal with, and how are you going about doing that?

Daniel Weltzien: The team in Nogales and here in the US that is managing this for us continues to do a great job in managing the supply chain to optimize costs of our products, and that includes the tariff situation. The short answer is if we look at our tariff exposure over the last 12 months, it has not really changed even in light of recent news as we sit here on 04/17/2026. Always subject to change, but as we sit here today, I do not think about tariffs differently than I have over the last couple of quarters.

Operator: Your next question comes from the line of Bobby Zulper with Raymond James. Your line is open. Please go ahead.

Bobby Zulper: Thanks for taking the question. I had come to the conclusion that your overall volumes of meters might be in the neighborhood of 20% elevated versus pre-COVID. What are your thoughts on that statement?

Kenneth Bockhorst: I do not have a lot of thoughts on that specific statement, and I do not mean that to be a snarky response. Our revenue is driven by many factors. When you look at what Robert just talked about on projects—turnkey versus supply-only—and the other dynamics that roll through, plus the new products we have added beyond the meter, I do not know how you would draw that conclusion. We have gained meter share over the past few years; I will agree to that. But in terms of specific sizing, I do not think I will get into that.

Bobby Zulper: Fair enough. Appreciate it. One clarifying question on the Section 232 tariffs. Do they get applied to the full value of either the meter or the cellular device when they go in and out of Mexico?

Daniel Weltzien: We do not talk about tariffs on individual product line-item levels. Any exposures that we do have are on the component side of our business as we are procuring materials, generally.

Bobby Zulper: Okay. So I am assuming because you are getting your brass bodies in Milwaukee, those are not getting tariffs themselves. It would just be the electrical equipment that is going into the meter and the cellular devices.

Daniel Weltzien: I will remind you the majority of the copper that we use is recycled brass, which is primarily in the US because you are not going to ship that around the world typically. So yes, that is not where we have exposures. It is on things like electronics and other components that may be sourced elsewhere in the world. But again, as we are shipping products in and out of Mexico, USMCA provides us protection from a tariff perspective.

Bobby Zulper: Alright. Thanks very much. I appreciate it.

Operator: Your next question comes from the line of Analyst with Jefferies Financial Group. Your line is open. Please go ahead.

James Coe: Good morning. Thanks for taking questions here. I wanted to ask about the awarded projects that you put on the slide. It seems like seven out of nine awarded projects involved full or partial competitive meter conversions. That is pretty impressive. What do you think is driving that success given the strong incumbent bias in the industry? Have you experienced any meaningful losses of your incumbent positions to competitors?

Kenneth Bockhorst: Thanks for the question. One of the dynamics we have explained over the past several years is that our portfolio—the resiliency of cellular AMI and the leadership position we have taken in software—has enabled us to convert market share. Looking at some of the projects we highlighted today, two of them are generation-one fixed network combo utilities that used to be someone else’s meter and someone else’s radio. During generation two, the water utilities decided that they no longer wanted to be on a fixed network, they went out to RFP, and we won that. After winning the AMI RFP—because it was not a full-product RFP—we then also converted the meters afterward.

We have another project where we were the meter incumbent but someone else’s AMR radio was on it, and because of our relationship and our cellular technology leadership, we were able to convert from a competitive AMR drive-by to our ORION cellular with BEACON SaaS. We have others where we converted both meters and radios. For the most part, we have been a 121-year leader in the industry for meters; now we are also the leader in the industry for AMI, and we are pulling in both ways.

James Coe: Got it. Very helpful. A clarification on the short-cycle orders: there is no particular reason that caused the slowdown—it is more inherent variability. If this inherent variability continues in a negative way throughout the year, does that pose downside risk to the outlook, or does the outlook assume improvement? I want to understand the dynamic better for the remainder of the year.

Kenneth Bockhorst: The first thing to remember in the metering industry is that nothing gets canceled. Things only move right because eventually you have to replace your meter if you want to improve nonrevenue water or conservation. Frankly, about 80% of the market has a radio attached to it, and once the radio goes dark, you cannot read the meter at all without manual reads. The dynamics of the business are that it only moves right. We have this timing issue here. We do expect some recovery; we do not expect it to stay on the weaker side of uneven. It is still where we have the least amount of visibility, but we do expect some upside compared to the current quarter.

Robert Wrocklage: Just to be clear, what we are saying for the whole year is flattish. Do not hear flattish as flat—hear flattish. There is some variability in that, not a wide degree of variability. We are giving you the direction, but know that there is some variability accounted for in that descriptor.

Operator: Your next question comes from the line of Michael Fairbanks with JPMorgan. Your line is open. Please go ahead.

Michael Fairbanks: Hey. Thanks for taking our questions. As we look at this new project-level disclosure, how should we think about the 800 thousand connections over the last three years relative to overall volumes? Then the same question as we look ahead to the 2.6 million to 3.6 million—overall expectations?

Kenneth Bockhorst: Projects have variability between turnkey revenue being much higher than supply-only and other pieces, so we are not going to size the revenue of what they were, but you can see they were impactful. As you compare that, simple math says 2.6 million is more than three times 800 thousand. Do not take a ruler and draw up 300%, but we do expect the next three to five years of these projects to be more than the last three years of those projects.

Daniel Weltzien: The other point is we provided this additional level of detail this quarter given the result, and we felt it was important for analysts and investors to understand what is informing our forward look and the high single-digit outlook that we have continued to talk about consistently across the business. Having had this visibility over the last number of years as we saw these projects moving throughout that multiyear funnel is what has informed our view.

Michael Fairbanks: Great. Thanks. I will leave it there.

Operator: Your next question comes from the line of Analyst with Barclays. Your line is open. Please go ahead.

Analyst: Good morning. I appreciate the time here. Congrats on the UDLive acquisition. I wanted to focus on your thoughts and strategy in the connected sewer line market. Do you have a view on how penetrated that market is today? Could you elaborate on the driving forces underpinning adoption of those products? How do utilities think about the value proposition or typical paybacks?

Kenneth Bockhorst: What we really liked about SmartCover, which we acquired slightly more than a year ago, is that it is the leader in the US market, which is a fantastic smart water market. Adoption is very early, but the problems are very real. By early, it is less than half a percent of the manhole covers in the US that have monitoring on them. The payback is quite simple. If you have experienced any of the rainfalls in the Midwest this week, combined sewer overflows are a significant and real problem that nobody wants. Inflow and infiltration is a real problem.

Cleaning optimization offers the ability to save a lot of money, with almost an immediate payback by having monitoring in place. The dynamics are extremely real, and every utility understands the value of implementing this technology. In the UK, adoption is also very early. These two markets, in particular, are exactly where we want to be because they are already the largest—albeit early—and fastest growing at the same time. Within both markets, and in particular the UK, regulation is really driving this. Utilities are being mandated to do it. Inside the UK AMP8 spending cycle, there is a massive amount of investment allocated—and actually demanded—to be spent in this area.

Acquiring the two premier brands in the two largest, fastest-growing, regulated markets with a clear understanding of why they are needed feels really good to us.

Analyst: Thanks for that. One more on the project disclosure: once a project actually starts to ship, how predictable is the timing around deploying the rest of those units? Does it follow a fairly typical deployment timeline?

Kenneth Bockhorst: I would refer you back to slide four. Even within the four projects, there is variability throughout those three years. Often it comes down to available labor, or a utility may find another priority for a few weeks. While over a three- or four-year period it can be fairly predictable, over a three-month period it is really not.

Daniel Weltzien: That is an important reason why, for PRASA, for example, we point out it is prone to hurricanes. As a hurricane might come by, that might impact a quarter or two of shipments. So you cannot just draw a straight line on that project in particular, but it applies across the board.

Analyst: Understood. Appreciate the color. That is all for me.

Operator: Your next question comes from the line of Scott Graham with Seaport. Your line is open. Please go ahead.

Scott Graham: Hey, good morning. Thanks for taking the question, and thanks for all the additional detail. I have one and then a follow-up. For incremental margin for the year, we can see what the decremental was for the first quarter and I would assume something similar in the second quarter. Does the second half, with implied top-line growth, get us back to that 25% to 30% level that we have seen from you for incremental margin, or does PRASA hurt that?

Daniel Weltzien: On PRASA, because it is the largest project we have ever done in a competitively bid, very attractive opportunity, the gross margins on that are not at the line-average level as other projects we have been awarded. However, the SEA leverage on a project like that is still very interesting and gets us back to operating leverage that is in line with the rest of the business.

Generally, as we think about the business and getting back to this flattish top-line result, we do not have a different view in terms of gross margins, and we are managing our SEA such that it should be flattish to where we were a year ago as well, which results in incrementals that look the way they do this year. That is more information than we have given historically—we do not give guidance—but I wanted to connect some of those dots we have tried to paint throughout the script.

Scott Graham: When you say SEA flat, you mean in dollars?

Daniel Weltzien: If you look over the last number of quarters, our SEA dollars have been relatively flat, and that expectation is not different moving forward. Keep in mind, we are closing the UDLive acquisition in April, so there is more SEA work to be done there. If you are asking on an organic basis, my answer was more to that.

Scott Graham: Got it. Thank you. My quick follow-up: you have talked a lot about high single digits as the way to look at you long term. With 2026 rolling out the way it does and you indicating that you are going to exit the year with a lot more momentum—Q4 this year versus Q4 last year—can we get back to that high single next year or perhaps higher?

Kenneth Bockhorst: I will talk to sentiment and what we think we know, stopping short of giving you a number. As we progress through the year and these projects head into deployment—while they may be uneven, they will be en route—we will certainly feel better coming into 2027 than we did coming into 2026. Our views on the long-term health of the market remain unchanged. I am not going to give you a number for 2027, but I do expect us to be back into a momentum period coming out of this.

Scott Graham: Appreciate that. Thank you.

Operator: Just as a reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Barbara for closing remarks. Correction. Apologies. We have one more question from Bobby Zulper with Raymond James. Your line is open. Please go ahead.

Bobby Zulper: Thanks for letting me jump back in. I just had a question on price and maybe related price/cost. In tracking some of the larger competitively bid projects, specifically Glendale, it seems like some of that pricing is below maybe what it was in 2022 and 2023. Does that look consistent throughout your business? Can I extrapolate that trend to the rest of the business?

Kenneth Bockhorst: First of all, Bobby, we are not going to comment on price project to project because there are so many different variables. Out of respect for our customers, we will not talk about price from project to project either.

Bobby Zulper: Alright. Thank you. I appreciate it.

Kenneth Bockhorst: You are welcome.

Operator: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Barbara for closing remarks.

Barbara Noverini: Thank you, operator. As a reminder, Badger Meter, Inc.’s inaugural Investor Day will take place on 05/21/2026 in New York City. Virtual participants may access the event through a live webcast accessible on the Badger Meter, Inc. Investor Relations website. During the event, we will provide greater color and tangible examples of the evolution of our BlueEdge portfolio along with a discussion of the key drivers enabling growth of our comprehensive suite of smart water management solutions. In addition, Badger Meter, Inc.’s second quarter 2026 earnings release is tentatively scheduled for 07/22/2026. Thank you for your interest in Badger Meter, Inc., and have a great day.

Operator: This concludes today's call. Thank you for attending, and you may now disconnect.

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